Saturday, 14 February 2009

Property high flyer in crash landing

Thanks to Matt for sending an interesting piece from the Wall Street Journal to the Gombeen Nation mailbox on the demise of the Irish economic miracle. And miracles, as we know, have no basis in reality.

One passage in the WSJ piece encapsulates the present, all too predictable, economic mess:

In a way, Ireland offers a lesson in how not to handle your newfound riches.

Alan Ahearne, an economist at the National University of Ireland in Galway, worked for the U.S. Federal Reserve. When he came back to Ireland in 2005, he was unnerved. House prices had rocketed, outpacing incomes and rents.

In 2006, the census found more than 250,000 empty properties, in a country with a population of just over four million. Many were investments their owners didn't bother renting out, so good were the gains from rising prices. "That, to me, was a scary sign," Mr. Ahearne said.

It is obvious that “Padraig and Mary” (to use Bernd’s apt expression) created the property bubble though careless borrowing with the aid of careless lending from the bank - and with official Government encouragement in the form of tax incentives,

To illustrate, it was reported in the Herald last week that banks and building societies loaned an Air Corp pilot just short of €8 million, “turning him into a ‘property tycoon’ in his spare time.” It seems that this particular Padraig “owned” a total of 12 properties, but found himself in the Circuit Civil Court where it was revealed that his property empire “had collapsed”, and that his paper properties had reverted into the hands of the financial institutions that provided the loans, while the family home had been repossessed.

It is difficult to grasp the mind-numbing stupidity of the Irish property boom, and the part played in creating and perpetuating the unsustainable illusion by the authorities and most economists, who acted as facilitators and cheerleaders. But still none of this exonerates the greedy Padraig and Marys – who priced people out of homes through their greed - from the blame in their own downfall.

When the Banks are being asked to put a stay on repossessions, as part of the recapitalisation plan, it would be assumed that investors and speculators will not be included in the measures? Otherwise, how will they ever learn that speculation, by definition, is a two-way street.

But nothing would surprise me here.

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Bernd said...

Just 2 cents:

In my opinion no home should be repossessed as long as it is not way OTT and as long as the owners (rather: tenants) are willing to make payments and to engage in meaningful discussions with banks and authorities (e.g. appear in court and reply to letters).

On the other hand property not used as a family (first) home should be immediately seized and put under an administrator. To be rented out at a cost price. Or to be sold at the cost price. Quickly. To cellar the slate and to provide more housing for those on a sub-100k-income.

Okay, property prices will tumble further and rents will get lower ... but that's the risk we should be willing to take.

Lew said...

Well said
Thats what should happen here as well (UK) but we also have what appears to be idiots ruling the country.

Ella said...

Well the idiots in the UK didn't give the property tax incentives like the idiots here. So idiotic they probably weren't, they knew exactly what they were doing.

aonghus said...

...not commence court proceedings for repossession of a principal private residence until after 12 months of arrears appearing, where the customer continues to cooperate reasonably and honestly with the bank....

Seems like they are being reasonable about it.

But the big speculators all seem to have boltholes and golden parachutes, so it will only be the foolish Pádraig and Marys who get hit.

Die Kleinen hängt man, die Großen lässt man laufen...

The Gombeen Man said...

Very true Aonghus... they'll write off developers' millions, but if you, me or any other Joe (or Padraig!) misses a payment, it's normally "down like a ton of bricks" stuff.

I'm glad you cleared that up about it applying to a principle private residence, I wasn't sure. I hope it won't be open to manipulation or the usual shystering, though?

In common with you all, I don't want to see the poor buggers who bought a place to live in at the height of the nonsense (probably out of fear of being left behind) getting hit. But the investors? A good excuse for some well-justified Schadenfreude in my book!

Bernd said...

Reading the court reports one also has a feeling that the judges are more often coming out on the side of the consumer ... as long as the consumer cooperates to his best ability.

One big problem is the number of "consolidation credits" that cropped up due to aggressive marketing over the last few years - all your payments in one and less. From what I understand you released equity (that did not really exist) on your house and used this to pay off the car loan, the second car loan, the boy's car loan, the plastic surgery for your daughter and the three holidays in Dubai.

Don't quote me on this, its way over my head. The main reason why I never was tempted to consolidate my loans. Ooops, only have one one the house anyway.

The Gombeen Man said...

And the three holidays in Dubai were to "snap up" a couple of apartments on that the strength of that "equity", Bernd!!!

Anonymous said...

Em just regarding your comments on Ireland in the late 80s and early 90s- the law regarding a presecription to buy contraceptives was actually repealed in 1985 GENIUS! You cud buy them in chemists without a prescription from 1985 onwards! And as reagards Priests and Nuns encourasging people to vote against Abortion in 1983 and Divorce in 1986- the majority of people voted against them at the time- so get over it! They were democratic votes end of story! And as reagards legalising abortion, while I agree with Divorce I totally disagree with leagaising abortion, maybe u think babies should be killed before birth if they aren't wanted I DON'T- There are too nany alternatives to abortion nowadays so one has an alternative choice if they don't want the child, there are adoption agfencies etc.


Anonymous said...

Ah GOMBEEN ( I call you that becausew that is what you are), I WAS THERE TOO, as Ella said they were in fact available in family planning clinics and a number of pharmacies DID sell them, which is where they were only sold in the smaller towns of massachusetts, us, at that time too! I had noo trouble finding them! And if u are going to result to insults, that shows how insecure your arguments are, and u just nonetheless invalidated your own previous argumenty about condoms being illegal without a doctors pprescription u muppet, in that they were nontheles available. ! I don't know about your local pharmacy but mine sold them, and I didnt get any glares or ooohs or aaahs,
And as for you ella, wow u are fantastic, oodles of credit on u. So what, U COULD STILL GET THEM ! and just to invalidate ur argument, I'm from NAAS in Kildare, and I could buy condoms in my local pharmacy in 1986! Maybe u and gombeen could both go back to London because as I've already said WE HAVE ENOUGH MOAN BAGS IN THIS COUNTRY talking their own country down, as this website is nothing but that-- a forum to slate this country. And by the way, there is no way u could have knowledge as whether or not only three designated outlets in this country were selling condoms, out of all the pharmacies and clinics in this country, and obviously u didnt know, because I'm from Kildare and I have just disproved u. And News Flash: MOST PEOPLE IN THIS COUNTRY ARE CATHOLICS! Not just pharmacists. Now as I've said to both of u, if u want to bash this country and hate it so much, then flights are relastively inexpensive nowadays, take a plane and move to some other ''paradise'' contry. And if u don't like my opinions then thats just tough. But I have lived and worked in boith the States and Australia and every country has problems, not just us. And I am absolutely sick of people like u looking for reasons to run this country down.

The Gombeen Man said...

Well, maybe Naas was a hotbed of liberism in 1985, but given the fact that it contains tosspots like you, I doubt it.

Condoms were not available in chemists back then, but seeing that you are too stupid to confine your confused comments to the relevant posts, that does not surprise me.

I can complain about aspects of this country as much as I like (and arseholes like you who inhabit it) - that is my right. So let me return your invitation: why don't you view another blog if this one upsets you so much?

Anonymous said...

:) I think I have proven my point, I won't play ur game anymore. CHEMISTS DID SELL THEM and were PERMITTED BY THE LAW TO DO SO.Even if the previous prescription law still applied, WHERE THE HELL DO U GO TO GET A PRESCRIPTION GENIOUS-- A PETROL STATION!?- NO A CHEMIST! How the hell did i get them, I just said I bought them in a chemist.
So u once again result to insults. I can offer my opinion too pal, its u who seem to hav a stalinist complex about people who disagree with ur opinions, i dont care what u write but i have the right to disagree with u, if u dont like it then u shouldnt have a public blog.
So by the same token I ONCE AGAIN (WHICH BY THE WAY U LEFT OUT OF THE PREVIOUS BLOG ENTRIES I WROTE) say to u: if u hate this country so much then why dont you just fcking leave it....?
And by the way, I am going to view another blog, I have no time for ignorant intolerant idiots like u. Goodbye

The Gombeen Man said...

Ha ha. You really are a great source of amusement for me, so please don't go away.

By the way, I did publish the other inane rants that you posted elsewhere on the site... they seem to be popping up everywhere. Would you not try to get out a bit? I think fresh air can help sometimes. To date, I have published every comment - no matter how mad... but maybe it's a policy worthy of review.

I don't hate everything about, or everyone in, this country... just people like you, who are too stupid to question things.

But you are funny - I'll give you that. Naas is very fortunate to have you.

Ella said...

Hello Mr Anonymous (I'm hoping that it's not a Ms, as I'm trying to distance myself from you as much as possible). This is Ireland and as a voting tax paying resident I most certainly do have the right to criticise what's wrong in the country. It's not Utopia. I've lived in a few different countries over the years and have learnt that Utopia does not exist. By living in countries other than Ireland I've been able to see what works well and what doesn't. Obviously, it's the things that don't work well that I complain about. It's only when we complain that we bring about change. I suppose you'd still have me chained to the kitchen sink, raising several children and with no right to vote.

Ella said...

Here, I just happened upon this article and it really is worth a read.

It wasn't until 1993 that all the restrictions regarding the sale and supply of contraceptives were removed.

Anonymous said...

To anonymous from NAAS:

I think regular readers of this site will join me in a collective sigh of relief that you DID manage to procure condoms, HOWEVER you managed to!!!!! :-)

Ella said...

To Anonymous (and no NOT YOU from Naas). What a class comeback. LOL here, I should have thought of that myself!

The Gombeen Man said...

Proof of my contention, despite the rantings of our cerebrally challenged friend from Naas. The year before, by the way, a doctor in Clane was prosectuted by the State for selling condoms without a prescription.

THE IRISH TIMES Friday Nov 9th 1984

“Non medical (sic) contraceptives will be provided without a prescripton for persons over 18 years of age through certain specifed outlets, under the terms of amendments to the Health (Family Planning Act) which the minister for health will formally propose to his colleagues next week.

As I have said, condoms were not available as recently as the 80s without a doctor's prescription.